*Not wanting to beat a dead horse, we’ll keep it shorter than normal today on the international markets so that we can sit and analyse all the fun of the stress-test results when the rumours have subsided and the boring reality of the facts are known. US futures currently reacting well to news that the results will be “re-assuring”: DJIA +51pts, S&P +4.6pts.
*There are no banks in a position of possible insolvency it now appears, but Bank Of America must be stressed to its eyeballs with Merrill Lynch as it certainly seems the brunt of its capital raising requirements are a direct result of their new purchase’s past purchases – an absence of a pre-nup in that marriage truly coming back to haunt BofA…which was the wife I wonder?
*We’ve had a lot of buying in cyclicals in the last few days and although some commentators believe this should end soon, there is a growing disagreement between the need to get back into the defensives and the continuation of the trade switch. Clearly we are still in the midst of an uncertain market, where the optimists seeing the good in even the bad (the second derivative being a prime example) outweigh negative sentiment and talk of more looming doom and gloom. The roster of disappointing corporate results is behind us for now, and investors are starting to feel for the ledge with their feet to determine whether there is another level on these markets to propel themselves to, or will they all slip and fall? No clear answer for now, more time needed.
*Looks like the ECB will be reducing rates to 1% in a short while (Bank of England maintained rates unchanged at 0.5%) – the reaction at the moment in Europe very positive. Majors are all trading up, with a good +2% avg. gain.
*Asia had a good day across the range, with Japan playing catch-up as it hurtled to a 4.5% rise. Hong Kong rising well again on belief US consumers are coming back soon and will facilitate trade in the medium-term – take a look at the Baltic Dry Index in the last three days – we were up 8.2% yesterday, the largest one day appreciation since early February this year – could it be we are really about to see some of the leading indicators take a turn or are we just kidding ourselves into an exceedingly disappointing realisation when the tide turns in a few weeks – no one seems sure at the moment, so it remains a great time to trade in and out.
*In keeping with this, Middle East markets are moving higher as the price of Oil seemingly recovers – we are in touching distance of $60/brl now in what has been a strong and quick break-out from the $50/brl range we seemed stuck in for several weeks. Gold continues to play as an inflation/deflation boom/bust hedge (it’s everything!) and itself has broken out of the 50day moving average and trading above $920, if it closes there would be first time since early last month.
Saudi shifts a little more…
Just following on from yesterday, a couple of points that had some people thinking on the back of the announcement that the GCC Central Bank will be located in Riyadh, Saudi Arabia: it has long been an extremely difficult place and many travellers have often been shocked at the temerity with which officials at the airport deal with the smallest errors on the visa application. Too many times to be simply a coincidence, passengers getting off planes from other parts of the GCC have had to return because their “papers were not in order”. That was a few years back though. In the last 5 years, and with King Abdullah at the helm, the growing ease with which business visas are obtained has been very noticeable. The importance of the religious police has slightly (only very slightly, but enough to make an impression) lessened. The latest move, and what must have been a concerted effort by Saudi to ensure it had its way with the GCC Central Bank, will only make things easier for those wanting to travel to the capital and throughout the nation.
Already “tourist visas” are possible – not as easily as many would want, but still a quicker and relatively easier route than the traditional visa process. With the Central Bank being an highly public and visible entity that will undoubtedly require a great deal of attention from local and international investment bankers, service providers, relationship managers and others involved in the financial world, the ease with which it can be visited will have to addressed even further.
At the moment, even for a business visa it can still take 3-5days to obtain clearance to visit the Kingdom. I do not see many urgent meetings the Central Bank will indubitably bring about, being able to wait 3-5days for clearance – it can be argued that this is just another step in the gradual opening up process of the Kingdom. All a part of the master plan that King Abdullah has been manoeuvring into place since his ascension to the throne in 2005.
Furthermore, for all that the likes of Abu Dhabi, Dubai, Bahrain and Qatar have (very admirably) done to create an open and attractive living environment, the truth of the matter is that Saudi’s reserves and their continued oil producing dominance make a strong and rational case for the Central Bank to be located in the Kingdom. However, the ease with which Western ex-pat families and workers are able to acclimatise their lifestyles to the “Middle-East” as a result of a relaxed approach to living (read: drinking and walking around in Western clothing) in those cities will leave Riyadh and the rest of Saudi in a seismic-shifting position of choice, sooner rather than later. With all the new economic cities that are being built across the Kingdom, it will become more and more self-evident that some changes to the traditionally strict Saudi way of life all are made to lead will have to change. The Central Bank may be just another small step in the very slow yet purposeful trek across the desert of increased freedom that the current Saudi King is intent on completing.
Radio blues…
On just a light note, what’s up with all the radio stations in the UAE possessing some sort of inexplicable obsession with American Idol and Hollywood gossip? When I wake up in the morning, like most others, I assume, I want to listen to a little music followed by some news – all we ever seem to get on Dubai radio stations (apart from Akon and Britney Spears) is talk about the latest comings and goings of Simon Cowell and the hopeful singers in the talent show across the Pond, as well as whether or not Paris Hilton really is pregnant. At times of great stress and in this current financial crisis it is always advisable to take a break from reality and focus on some entertaining issues in life, but totally absorbing oneself in the (meaningless) lives of others cannot be good for the soul. For a while Dubai was creating its own character and learning from a serious dosage of humility as it grappled with an uncertain future and a very visible reduction in lavish lifestyles, but with this trend on the city’s radio stations, it is a worrying sign that the backlash against decency and a raising of the intellect may have begun. Britney must be happy, but with questions like “What is 10% of 400Dhs” on the daily “quiz” show (for adults!), someone pleeeeaaase hit the radio producer one more time.
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